Main Menu

You are here

The Great Recession

The dramatic drop in the U.S. economy from late 2007 through the summer of 2009 had been labeled "The Great Recession." The economic events during this period provide an excellent laboratory for exploring the ideas presented on these MWM pages. The page "Significance of the Great Recession" summarizes what happened during Great Recession and its aftermath. It is a good place to start. The page on "Causes of the Great Recession" describes how rising household debt sowed the seeds of the crisis along general lines described by the financial instability theory of the late economist Hyman Minsky. From the "Causes" page there is also a link (now under construction) that describes Minsky's theory in more detail.

We also propose that rising income inequality played a central role in the forces that led up to the Great Recession and, especially, that are holding back the recovery relative to the typical pattern following U.S. recessions in recent decades. The page "Income Inequality and the Great Recession" summarizes research by MWM-founder Steven Fazzari and co-author Barry Cynamon that explains how the slowdown of wage and salary growth for the bottom 95% of the income distribution led to, first, an unprecendented rise in household debt relative to income for this group and, second, a collapse in spending by the bottom 95% that caused the Great Recession and we argue is significantly holding back the recovery. This page also contains a link to some policy implications that follow from the analysis.

The "Lessons from the Great Recession" page summarizes our view of the root causes of the crisis and the lessons it teaches us about macroeconomics and the challenges faced by the U.S. economy going forward.